Also, check the markup to see if any img tag is being drawn for the video thumbnail and track down that image. The images are stored in your File table with the Title flv_thumb_123 where 123 is the ID of the FLV file.

There is no image tag being written. Nothing is written. The thumbs exist in the File table, complete with Paths, but do not Physically exist. Nothing is ever created in the video_thumbnails folder. Ever seen this one?